The European commercial real estate (CRE) market is experiencing an ongoing recovery, despite geopolitical uncertainties and increased borrowing costs modifying investment behaviour. A recent analysis by Cushman & Wakefield highlights that, despite a slowdown in transaction activity due to the geopolitical situation in the Middle East, fundamental market parameters remain robust. This is manifested in stable labour markets, limited supply, and consistent rental growth in prime locations and properties.
According to Cushman & Wakefield's “Investment Atlas”, the market is characterised by a transition into a more mature phase of recovery. Identifying opportunities now requires increasing precision, discipline, and careful asset selection. Macroeconomic challenges do not fundamentally affect this recovery process.
The TIME Score, a cyclical positioning indicator for European real estate assets from Cushman & Wakefield, showed a minimal decline to 3.0 (from 3.1 in Q3 2025) in Q1 2026. This slight adjustment reflects the more restrictive financing environment, but market positioning remains in a stabilisation phase. Cushman & Wakefield’s Fair Value Index, which measures the relative price attractiveness in European prime office, retail, and logistics markets, indicates that 56 percent of markets remain undervalued, suggesting consistent investment potential.
However, the window for comprehensive revaluations is narrowing, as a growing number of markets reach fair value and are thus classified as “fully priced”. The European Fair Value Index (FVI) declined to 74 in Q1 2026 (from 89 in Q3 2025), indicating reduced undervaluation across the region. Nevertheless, European commercial property continues to offer attractive risk-adjusted opportunities, although valuation differentials have converged in several markets. This correction results from higher government bond yields and subdued growth expectations.
Guilherme Neves, Senior Research Analyst, EMEA Forecasting at Cushman & Wakefield, stated that European markets largely remain attractive. However, the convergence towards fair value means that confidence, conviction, and the correct selection of investment properties are increasingly becoming drivers of returns.
Logistics and retail properties remain in the investment “sweet spot” in terms of optimal timing and fair value, offering attractive risk-adjusted opportunities. Residential and office properties remain in a “strategic matrix” where performance is increasingly dependent on quality, location, and cash flow potential. The office sector is proving highly selective, with demand focused on prime assets with strong letting potential. Significant valuation adjustments were particularly evident in Germany, where approximately half of the markets have reached fair pricing. The most extensive adjustments were observed in Hungary and Italy, increasing the number of “fully priced” markets in Europe to nine, including Norway. This highlights the rapid adaptability of pricing dynamics to rising interest rates.
Martin Belik, Head of Valuation & Advisory Germany at Cushman & Wakefield, remarked that after the market-wide revaluation has largely been completed, valuation levels will be more shaped by property-specific characteristics such as quality, location, and cash flow strength than by general market movements.
After a brief quiet period caused by geopolitical shocks, lenders are becoming more active again. Capital availability from banks, debt funds, and alternative lenders remains comprehensive and diversified. However, transaction activity continues to be limited by a price difference between buyer and seller expectations. David Poremba, EMEA Debt Advisory at Cushman & Wakefield, commented that debt capital has led the way; liquidity and financeability are available. The crucial question remains whether equity capital will find the conviction to return to the market.
As valuation-driven gains diminish, market observers note a strategic reorientation of investors towards income generation, operational implementation, and asset resilience. Markets with strong supply-demand fundamentals, sustainable rental growth, and high-quality assets are expected to perform better in the coming cycle phase. Some investors are increasing their focus on sectors such as logistics and residential, and retail assets are regaining attractiveness. A growing number of buyers are also focusing on office segment opportunities where fundamentals support long-term value development. David Hutchings, Head of EMEA Investment Strategy at Cushman & Wakefield, noted that volatility is not a new phenomenon, but the speed of macroeconomic change represents a new reality that requires a strategic response. Investors can stabilise portfolios by selecting the right assets that meet user needs. This underscores that selectivity will define the upcoming market phase.
